[ChuckMcM]

At some level this situation was inevitable, as more and more companies offload their fab capability to TSMC, that gives more and more money for TSMC to invest in boosting their capability, and of course while their margins are a lot less than Intel's with enough money that advantage goes away as well.

Intel's instruction set architecture dominance will keep it going for a long time but ultimately it would probably make sense for Intel to spin off its fabs into the US equivalent of TSMC and capture more margin revenue from their designs versus their process.

[wahern]

Intel's advantage over AMD has been it's (1) manufacturing technology and (2) architecture, especially since Sandy Bridge.

It turns out that Intel's architecture cheated by skipping privilege checks during speculation, while AMD designs did the correct thing. SMT turns out to be a security nightmare, but in any event AMD now offers the same capability. Either way SMT is another lost advantage.

That leaves Intel's process technology and vertical integration. If it outsources manufacturing it will have effectively ceded these completely, meaning Intel will have lost all of its competitive advantages.

I suppose Intel's human capital might be a competitive advantage, but their missteps cast serious doubt on that.

[deepnotderp]

TSMC's gross margin is something like 50% iirc so it's not even that bad

[ChuckMcM]

50.9% on 32B$ for TSMC[1] vs 62.3% on 62.7B$ for Intel[2] That is closer than I expected it to be. In terms of actual cash (if you are wondering) Intel ended last year with $22B more of it than TSMC did.

[1] http://www.tsmc.com/download/ir/annualReports/2017/english/p...

[2] https://s21.q4cdn.com/600692695/files/doc_financials/2017/an...

[ksec]

Would it not be better to compare Net Income?

TSMC ~ $11B Intel ~ $9.5B

TSMC has become more profitable than Intel since 2016.

[ChuckMcM]

[Disclaimer I own a small amount of Intel in my IRA account]

If you have ever been in an investment club (basically friends who get together and exchange ideas on what stocks to invest in) you have probably had the 'revenue/income' discussion.

Amazon is the poster child for 'net income doesn't matter' as it has reinvested most of its margin in itself over the years to grow.

So it can go either way.

TSMC does pay a dividend which Intel doesn't so from a financial trading/investing point of view you could argue that TSMC is a better stock to hold long as it will generate income.

From the 'future of the business' point of view re-investing more would seem to be the wiser strategy. Time will tell.

[ksec]

The problem is I haven't seen any major results from Intel's investment for the past 4+ years. And I have no idea where are all of their R&D into. TSMC has been building more Fabs every single year, higher expenditure, while Intel has had little to no Fab capacity expansion ( Apart from the recent 14nm shortage ). In terms of CAPEX TSMC is only second to Samsung, but Samsung is the world largest DRAM and NAND maker.

In terms of roadmap TSMC has been extremely open about their progress all they way down to 3nm and has been executing to perfection. They take pride to be Apple's pure play Fab.

I do believe in re-investing for the future, the problem is I have trouble seeing that future from Intel. And their management has been lying for far too long doesn't bring me confidence.

Time will Tell.

[trevyn]

Intel sees the writing on the wall and has been making progress on opening up access to their fabs.

[slededit]

From what I've heard their isolation has made their tech largely incompatible with external workflows. Similar to how mainframes are technically computers but the software is alien to most people. They don't even use the same names for common things.

[SlightGenius]

That idea of Intel spinning off and developing it's own TSMC sounds great! What other factors have prohibited from someone else developing a more viable TSMC competitor in the US?

[ChuckMcM]

The idea isn't exactly unique, in that AMD did it and called it Global Foundries(GF)[1]. Then in 2015 IBM divested their foundry capabilities and sold them to GF as well. It hasn't been a stellar experiment which is largely laid at the feet of the challenge of managing that business.

[1] https://www.globalfoundries.com/